Page 232 - AA Integrated Workbook STUDENT 2018-19

Chapter 12

3.2 Emphasis of Matter paragraph

ISA 706 (Revised) Emphasis of Matter Paragraphs and Other Matter Paragraphs in
an Auditor's Report

Purpose

Used to refer to a matter that has been adequately presented or disclosed in the
financial statements by the directors.

The auditor's judgment is that these matters are of such fundamental importance to
the users' understanding of the financial statements that the auditor should
emphasise the disclosure.

Examples

 Major catastrophes that have had a significant effect on the entity's financial
position.

 An uncertainty relating to the future outcome of exceptional litigation or
regulatory action.

 A significant subsequent event occurs between the date of the financial
statements and the date of the auditor's report.

Position in the auditor's report

Below the Basis for Opinion section.

When a Key Audit Matters section is presented in the auditor’s report, an Emphasis
of Matter paragraph may be presented either directly before or after the Key Audit
Matters section, based on the auditor’s judgment as to the relative significance of the
information included in the Emphasis of Matter paragraph.

Tutorial notes:

 An Emphasis of Matter paragraph is not used to draw attention to immaterial
misstatements. The fact that they are immaterial means they do not warrant
the attention of the shareholders.

 An Emphasis of Matter paragraph can only be used when adequate disclosure
has been made of the matters mentioned above. The auditor can only
emphasise something that is already included.

 Where adequate disclosure has not been made the opinion will need to be
modified and an Emphasis of Matter paragraph should NOT be used.

 The heading of the paragraph can be amended to provide further context, for
example, Emphasis of Matter – Subsequent event.

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